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Check Point Software Reports Financial Results for the Second Quarter 2008
REDWOOD CITY, Calif. --(Business Wire)-- Check Point(R) Software Technologies Ltd. (NASDAQ:CHKP), the worldwide leader in securing the Internet, today announced its financial results for the second quarter ended June 30, 2008.
"Check Point's success during the quarter is a direct result of effectively executing our Total Security strategy," said Gil Shwed, chairman and chief executive officer at Check Point. "We have continued to experience strength across our business which is reflected in the double-digit year over year growth in revenue, earnings per share and deferred revenue."
Financial Highlights for the Second Quarter of 2008:
-- Total Revenues: $199.6 million, an increase of 13 percent, compared to $176.2 million in the second quarter of 2007. Product and license revenue was $85.0 million, an increase of 16 percent, compared to $73.3 million in the second quarter of 2007.
-- Net Income - GAAP: $79.2 million, an increase of 14 percent, compared to $69.5 million in the second quarter of 2007. Net income in the second quarter of 2008 includes acquisition-related charges of $8.9 million and equity-based compensation expenses of $8.4 million. Net of taxes, these charges totaled $13.5 million. Net income in the second quarter of 2007 included acquisition-related charges of $10.3 million and equity-based compensation expenses of $8.6 million. Net of taxes these charges totaled $16.2 million.
-- Net Income - Non-GAAP:(1) $92.7 million, an increase of 8 percent, compared to $85.7 million in the second quarter of 2007. Non-GAAP net income excludes equity-based compensation expenses and acquisition-related charges.(2)
-- Earnings per Diluted Share - GAAP: $0.36, an increase of 18 percent, compared to $0.31 in the second quarter of 2007. GAAP earnings per diluted share for the second quarter of 2008 included equity-based compensation expenses of $0.04 and acquisition-related charges of $0.05. Net of taxes, these charges totaled $0.07. GAAP earnings per diluted share for the second quarter of 2007 included acquisition-related charges of $0.05 and equity-based compensation expenses of $0.03. Net of taxes these charges totaled $0.07.
-- Earnings per Diluted Share - Non-GAAP: $0.43, an increase of 12 percent, compared to $0.38 in the second quarter of 2007. Non-GAAP earnings per diluted share exclude equity-based compensation expenses and acquisition-related charges.
-- Deferred Revenues: As of June 30, 2008, we had deferred revenue of $279.2 million, a $43 million or 18% increase compared to deferred revenues as of June 30, 2007.
-- Cash Flow: $82.6 million in cash flow from operations and we had $1.34 billion in cash and investments as of June 30, 2008.
-- Share Repurchase Program: During the second quarter of 2008, Check Point repurchased 2.1 million shares at an approximate cost of $50.0 million.
Business Highlights for the Second Quarter of 2008:
Since April we have expanded and continued to improve the performance of our unified line of security gateways. We introduced the Power-1 appliances, a new line of high-performance security gateways delivering excellent performance of up to 14 Gbps and record price performance at less than $4 per Mbps. In addition, we added five new UTM-1 Total Security appliances, expanded the range of solutions from a sub-five thousand dollar model and up to 4.5 Gbps performance providing our customers with more choices when selecting network security appliances. The new appliances further compliment our Open Choice program which allows customers to choose from a variety of gateway security platforms, including Check Point Power-1 and UTM-1 branded appliances, software on open servers and Check Point software integrated on partner appliances.
We continued to address the growing security needs of our customers utilizing Apple's Mac OS X and iPhone with the release of Check Point Full Disk Encryption (FDE) for the Mac and VPN-1 support for the iPhone. Our FDE for Mac is the only enterprise full-disk encryption solution with pre-boot authentication available in the market today.
During the second quarter we also received awards from third-party industry organizations including: "Best Enterprise Firewall" from SC Magazine for Check Point VPN-1 Power, "Endpoint Security Product of the Year" from Techworld for Check Point Endpoint Security, "VB100 Award" from Virus Bulletin for ZoneAlarm Internet Security and "Ten Best Web Support Sites" for 2008 from Association of Support Professionals
Mr. Shwed concluded, "I am pleased with our results for the quarter as we have now exceeded our plans for the sixth quarter in a row. During that time we have also expanded and executed our strategy of delivering a comprehensive integrated security solution that includes a unified line of security gateways, a single-agent for endpoint security and a single security management console."
Conference Call and Webcast Information
Check Point will host a conference call with the investment community on July 22, 2008 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit Check Point's website at http://www.checkpoint.com/ir. A replay of the conference call will be available through August 5, 2008 at the company's website http://www.checkpoint.com/ir or by telephone at +1.800.642.1687 passcode # 54900277.
(1) See "Use of Non-GAAP Financial Information" and "Reconciliation of Supplemental Financial Information" below for more information regarding Check Point's use of non-GAAP measures.
(2) "Equity-based compensation expenses" refer to the amortized fair value of all equity based awards granted to employees. "Acquisition-related charges" refer to the impact of the amortization of intangibles.
About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com) is the leader in securing the Internet. Check Point offers total security solutions featuring a unified gateway, single endpoint agent and single management architecture, customized to fit customers' dynamic business needs. This combination is unique and is a result of our leadership and innovation in the enterprise firewall, personal firewall/endpoint, data security and VPN markets.
Check Point's award-winning ZoneAlarm solutions protect millions of consumer PCs from hackers, spyware and identity theft. Check Point solutions are sold, integrated and serviced by a network of Check Point partners around the world and its customers include 100 percent of Fortune 100 companies and tens of thousands of businesses and organizations of all sizes.
(C)2003-2008 Check Point Software Technologies Ltd. All rights reserved.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Check Point uses non-GAAP measures of net income, operating income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges in accordance with SFAS 123R, in-process R&D expense and acquisition related charges. Check Point's management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of Check Point's ongoing core operations and prospects for the future. Historically, Check Point has also publicly presented these supplemental non-GAAP financial measures in order to assist the investment community to see the Company "through the eyes of management," and thereby enhance understanding of its operating performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures discussed in this press release to the most directly comparable GAAP financial measures is included with the financial statements contained in this press release. Management uses both GAAP and non-GAAP information in evaluating and operating business internally and as such has determined that it is important to provide this information to investors.
Safe Harbor Regarding Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, statements related to Check Point's expectations that we will continue to build upon the success of our industry-leading security products by increasing the breadth of their functionality and providing tighter integration throughout our comprehensive product line to address the security needs of our customers worldwide. Because these statements pertain to future events they are subject to various risks and uncertainties, actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to: general market conditions in the Check Point's industry; economic and political uncertainties; the impact of political changes and weaknesses in various regions of the world, including hostilities or acts of terrorism in Israel, where Check Point's international headquarters are based; inclusion of network security functionality in third-party hardware or system software; any foreseen and unforeseen developmental or technological difficulties with regard to Check Point's products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; rapid technological advances and changes in customer requirements to which Check Point is unable to respond expeditiously, if at all; a shift in demand for products such as Check Point's; factors affecting third parties with which Check Point has formed business alliances; and the timely availability and customer acceptance of Check Point's new and existing products. The forward-looking statements contained in this press release are subject to other factors and risks, including those discussed in Check Point's Annual Report on Form 20-F for the year ended December 31, 2007, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations or beliefs.
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Products and
licenses $ 84,973 $ 73,318 $ 162,352 $ 139,366
Software updates,
maintenance and
services 114,633 102,874 228,851 200,795
----------- ----------- ----------- -----------
Total revenues 199,606 176,192 391,203 340,161
----------- ----------- ----------- -----------
Operating expenses:
Cost of products and
licenses 9,693 6,747 18,686 11,987
Cost of software
updates,
maintenance and
services 7,101 5,899 13,851 11,357
Amortization of
technology 5,800 7,154 12,954 13,416
----------- ----------- ----------- -----------
Total cost of revenues 22,594 19,800 45,491 36,760
Research and
development 23,824 20,775 46,569 39,643
Selling and
marketing 56,588 55,176 110,248 107,338
General and
administrative 13,005 11,621 26,571 25,721
Acquired in process
research and
development - - - 17,000
----------- ----------- ----------- -----------
Total operating
expenses 116,011 107,372 228,879 226,462
----------- ----------- ----------- -----------
Operating income 83,595 68,820 162,324 113,699
Financial income, net 12,789 11,645 27,409 24,713
----------- ----------- ----------- -----------
Income before income
taxes 96,384 80,465 189,733 138,412
Taxes on income 17,211 11,004 32,302 22,003
----------- ----------- ----------- -----------
Net income $ 79,173 $ 69,461 $ 157,431 $ 116,409
=========== =========== =========== ===========
Earnings per share
(basic) $ 0.37 $ 0.31 $ 0.72 $ 0.52
=========== =========== =========== ===========
Number of shares used
in computing earnings
per share (basic) 215,030 223,291 217,568 222,989
=========== =========== =========== ===========
Earnings per share
(diluted) $ 0.36 $ 0.31 $ 0.71 $ 0.52
=========== =========== =========== ===========
Number of shares used
in computing earnings
per share (diluted) 217,951 226,151 220,192 225,806
=========== =========== =========== ===========
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
RECONCILIATION OF SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share amounts)
----------------------- -----------------------
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
GAAP operating income $ 83,595 $ 68,820 $ 162,324 $ 113,699
Stock-based
compensation (1) 8,385 8,588 17,456 16,926
Amortization of
intangible assets (2) 8,893 10,338 19,197 19,308
Acquired in process
research and
development - - - 17,000
----------- ----------- ----------- -----------
Non-GAAP operating
income $ 100,873 $ 87,746 $ 198,977 $ 166,933
=========== =========== =========== ===========
GAAP net income $ 79,173 $ 69,461 $ 157,431 $ 116,409
Stock-based
compensation (1) 8,385 8,588 17,456 16,926
Amortization of
intangible assets (2) 8,893 10,338 19,197 19,308
Acquired in process
research and
development - - - 17,000
Taxes on stock-based
compensation and
amortization of
intangible assets (3) (3,753) (2,698) (8,017) (5,344)
----------- ----------- ----------- -----------
Non-GAAP net income $ 92,698 $ 85,689 $ 186,067 $ 164,299
=========== =========== =========== ===========
GAAP Earnings per
share (diluted) $ 0.36 $ 0.31 $ 0.71 $ 0.52
Stock-based
compensation (1) 0.04 0.03 0.08 0.07
Amortization of
intangible assets (2) 0.05 0.05 0.10 0.09
Acquired in process
research and
development - - - 0.07
Taxes on stock-based
compensation and
amortization of
intangible assets (3) (0.02) (0.01) (0.04) (0.02)
----------- ----------- ----------- -----------
Non-GAAP Earnings per
share (diluted) $ 0.43 $ 0.38 $ 0.85 $ 0.73
=========== =========== =========== ===========
Number of shares used
in computing Non-GAAP
earnings per share
(diluted) 217,951 226,151 220,192 225,806
=========== =========== =========== ===========
(1) Stock-based
compensation:
Cost of products
and licenses $ 15 $ 13 $ 27 $ 24
Cost of software
updates,
maintenance and
services 194 193 377 310
Research and
development 1,204 1,060 2,301 2,070
Selling and
marketing 1,926 2,627 4,166 4,348
General and
administrative 5,046 4,695 10,585 10,174
----------- ----------- ----------- -----------
8,385 8,588 17,456 16,926
(2) Amortization of
intangible assets and
acquisition related
expenses:
Cost of products
and licenses 5,800 7,154 12,954 13,416
Selling and
marketing 3,093 3,184 6,243 5,892
----------- ----------- ----------- -----------
8,893 10,338 19,197 19,308
(3) Taxes on stock-
based compensation
and amortization of
intangible assets (3,753) (2,698) (8,017) (5,344)
----------- ----------- ----------- -----------
Total, net $ 13,525 $ 16,228 $ 28,636 $ 30,890
=========== =========== =========== ===========
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
ASSETS
June 30, December 31,
2008 2007
------------ --------------
(unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 472,970 $ 509,664
Marketable securities 279,557 332,355
Trade receivables, net 158,129 201,515
Other current assets 29,899 21,595
------------ --------------
Total current assets 940,555 1,065,129
------------ --------------
Long-term assets:
Marketable securities 590,246 399,490
Property, plant and equipment, net 57,098 56,947
Severance pay fund 12,115 9,302
Deferred income taxes, net 17,793 14,920
Intangible assets, net 140,937 160,133
Goodwill 664,602 664,910
Other assets 645 636
------------ --------------
Total long-term assets 1,483,436 1,306,338
------------ --------------
Total assets $ 2,423,991 $ 2,371,467
============ ==============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Deferred revenues $ 279,188 $ 273,693
Trade payables and other accrued
liabilities 81,404 116,406
------------ --------------
Total current liabilities 360,592 390,099
------------ --------------
Income tax accrual 91,470 78,545
Deferred tax liability, net 26,845 31,465
Accrued severance pay 17,585 14,403
------------ --------------
Total liabilities 496,492 514,512
------------ --------------
Shareholders' equity:
Share capital 774 774
Additional paid-in capital 489,017 464,330
Treasury shares at cost (1,011,033) (907,022)
Accumulated other comprehensive income
(loss) (6,330) 1,233
Retained earnings 2,455,071 2,297,640
------------ --------------
Total shareholders' equity 1,927,499 1,856,955
------------ --------------
Total liabilities and shareholders'
equity $ 2,423,991 $ 2,371,467
============ ==============
Total cash and cash equivalents and
marketable $ 1,342,773 $ 1,241,509
============ ==============
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands)
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash flow from
operating activities:
Net income $ 79,173 $ 69,461 $ 157,431 $ 116,409
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization of
property, plant and
equipment 2,186 1,707 4,375 2,944
Decrease (increase) in
trade and other
receivables, net (11,342) 2,063 36,784 40,624
Increase (decrease) in
deferred revenues,
trade payables and
other accrued
liabilities 1,213 (7,557) 4,544 (13,343)
Acquisition of in
process research and
development - - - 17,000
Amortization of
intangible assets 8,893 10,338 19,197 19,308
Stock-based
compensation 8,385 8,588 17,456 16,926
Excess tax benefit from
stock-based
compensation (2,681) - (6,029) -
Deferred income taxes,
net (3,268) (3,136) (8,323) (8,396)
----------- ----------- ----------- -----------
Net cash provided by
operating activities 82,559 81,464 225,435 191,472
----------- ----------- ----------- -----------
Cash flow from
investing activities:
Cash paid in
conjunction with the
acquisition of Protect
Data, net (9,042) (260) (9,042) (594,294)
Investment in property,
plant and equipment (2,591) (5,564) (4,526) (9,986)
----------- ----------- ----------- -----------
Net cash used in
investing activities (11,633) (5,824) (13,568) (604,280)
----------- ----------- ----------- -----------
Cash flow from
financing activities:
Proceeds from issuance
of shares upon
exercise of options 9,304 7,418 15,772 14,935
Purchase of treasury
shares (50,000) (50,000) (123,000) (105,627)
Excess tax benefit from
stock-based
compensation 2,681 - 6,029 -
----------- ----------- ----------- -----------
Net cash used in
financing activities (38,015) (42,582) (101,199) (90,692)
----------- ----------- ----------- -----------
Unrealized gain (loss)
on marketable
securities, net (8,844) (4,388) (9,404) 3,738
----------- ----------- ----------- -----------
Increase (decrease) in
cash and cash
equivalents, deposits
and marketable
securities 24,067 28,670 101,264 (499,762)
Cash and cash
equivalents, deposits
and marketable
securities at the
beginning of the
period 1,318,706 1,121,506 1,241,509 1,649,938
----------- ----------- ----------- -----------
Cash and cash
equivalents, deposits
and marketable
securities at the end
of the period $1,342,773 $1,150,176 $1,342,773 $1,150,176
=========== =========== =========== ===========
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